Why I’m Bearish Bitcoin Short-Term

On Thursday September 24th, we had a small relief rally in all markets. NASDAQ was up 0.37%, gold 0.31% and bitcoin 3.3%. For a few reasons I see this as a small bounce before a cascading movement downwards.

CME Futures Gap

For some time now, the CME futures market has been a fundamental indicator for technical traders to spot trends. Many play off the gaps and right now the unfilled $9.6k gap is still in play. The daily chart below shows a clear downward trend since the $12.4k high. The inability to keep prices at $12k marked the end of bitcoin’s short-term bull rally. The second bear signal was when $11.1k flipped from being the support to being the resistance. Now the next movement downwards will head for the CME gap at $9,600.

BTC/USD 1-day chart. Source: TradingView

Dollar Strengthening

One major factor for why assets have been performing poorly is the strengthening of the U.S. Dollar. As investors predict further sell-offs they begin to get back into the safest thing they know. The dollar index (DXY) has broken above its two-month-long range of 92–94. If markets continue to grow weary of volatile times, the dollar will soar and commodities, equities and crypto will plummet.

Bitcoin specifically has moved in opposite directions to the dollar index since March, with an apparent inverse correlation becoming more noticeable since mid-July. The one factor to prevent further strengthening is a sharp rebound in the stock market. This would notably recover bitcoin and gold as well.

Whale Clusters Mark Resistance

Whalemap, an on-chain analysis firm, released data showing where big players accumulated or moved their holdings. Shown on the map below, we see that the four key short-term price levels are $10,369, $10,570, $10,734 and $10,842. These prices could act as resistances and prevent the price of bitcoin to beyond these walls.

The hourly map of unspent Bitcoin from whales. Source: Whalemap

Whales have a tenancy to wait until they break even or when they’re in the green to sell which is why resistance at those price levels are a valid claim.

Data also shows that whales have sold at $10.9k-$11.1k, giving us another bearish sign.

The HODLer volume of Bitcoin whales. Source: Whalemap

BTC Worst-Case Scenario

As the macro environment worsens and investors cash-in on their profits we’re likely to see a correction in all markets. Specifically, bitcoin could see a revisit to $9k or as low as $7k. Veteran trader Tone Vays says that buying at $9k would be a good “buy the dip” opportunity. He also expressed his concern of prices falling further than $9 if selling pressure continues to accumulate.

“What is my worst case scenario low point if we break down? My worst case scenario is $7,000.”

-Tone Vays

PlanB, a quant analyst, validates Vays claim by using the 200-week moving average as guide. They find that 200-week MA shows a realistic price floor of $6,700, next month it would be $7,000.

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Cryptocurrency Research

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